Wednesday, June 14, 2006

What is Land (a series)

Often times, when explaining the ideas of Henry George, I find myself trying to explain what George meant by “Land”. Understanding what land is, is critical to understanding Henry George. Nothing can be produced without land, just like fire can never be produced without fuel.However, land is not limited to just the soil under feet, the mountains on the horizon, or the never ending plains. Generally speaking, anything that is born from the fruits of nature, which man had no involvement in making is land. So, things like the electromagnetic spectrum, fisheries, and public grazing rights are also considered land. However, even this definition is too narrow. Another way of thinking about the nature of land, is when something is a scarce resource, and this can be an artificially scarce resource. Unlike the free-market which will provide the exact quantity of a given good, scarce resources provide less then the demanded price at equilibrium and so a shortage is created, which creates a rent. Monopolies create their own monopolistic rent, for example by providing less goods to the market place.

However, this is a series on understanding land and I want to use every day examples which people may not have thought of which are land and carry rent.

Parking meters. Parking meters are an actual Georgist solution to a real world problem. Street Parking (Avenue in NYC) in the city of New York (or anywhere) is scarce because many people want to park in front of their favorite business, go in, and then get back in their cars. The amount of street parking is fixed and it is also a different good then garage parking. We can never make more street parking because we can never make more streets. However, without a parking meter what will happen? Individuals will leave their car for an indefinite period of time, absorbing those rents. The person parking their car in that spot has the benefit of good parking while every one else has inconvenience of no parking adding time, gas, and costly underground parking to anyone wishing to make a quick visit to a store. The result would be fewer people visiting the stores, which is not what as a society want.

To remove the speculators from the land we tax the land at its fullest value. In this case, we charge a rent for people to park their car for one hour on Madison Avenue and after that time they need to put more money in the meter or move their car. Taxing street parking will not street parking out of production, indeed, more people will participate in street parking rather then parking in costly garages. The revenue from street parking is used to pay for the meters themselves as well as the enforcement of the parking, with the remainder (presumably) distributed to other city services. It is equitable because the wealthy are more likely to drive in cities then those who are poor. It is Just because I am not taxing the product of labor, or the interest from capital.

Don’t believe me? Go to NYC and take a drive around the east 80’s and loop back through Madison Avenue. In NYC they do not have meters on streets, but they have a very steep meter on Avenues. If I was mayor of NYC I would start meters on the streets also, although they would have 24hr timers or 12 hr timers.